2021 (5) TMI 112 - Tri - IBC

Tribunal Rules Application Time-Barred; Not Maintainable Against Sole Corporate Debtor in Joint Venture Context.

The NCLT dismissed Application IBA/31/KOB/2020, ruling against the Applicants on all issues. The Tribunal determined that the Applicants were Financial ... Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - Applicants are ‘decree holders’ and not as allottees in a real estate project - project is a joint venture by the Corporate Debtor and M/s. Cherupushpam Films (P) Ltd - Time limitation - HELD THAT:- In the decision of Hon’ble NCLAT in the matter of Innoventive Industries V. ICICI Bank &another [2017 (9) TMI 58 - SUPREME COURT], it is held that for initiation of CIRP under Sub Section 4 of Section 7 of the Code,2016, the adjudicating authority’ on receipt of application under Sub Section (2) is required to ascertain existence of default from the records of Information Utility or on the basis of other evidence furnished by Financial Creditor under Sub Section 3. Whether the Application was filed under Section 7 of I&B Code,2016 by the Applicants in the capacity of Allottees of Apartments or on the basis of Arbitral Award as Decree Holders? - HELD THAT:- If the builder fails to deliver the possession of the real estate project, they agreed to pay penalty of ₹ 25/- per square feet to the Applicants. Here, the debt was disbursed against the consideration for the time value of money which includes an amount raised from an allottees under a real estate project, and this transaction has the commercial effect of a borrowing. Whether the Application is barred by limitation? - HELD THAT:- The Applicants have entered into an Agreement of Sale and subsequently sale deed was also executed, which has occurred over three years prior to the date of filing of this Application. In the present case, the Corporate Debtor has not delivered the possession of the real estate property. The default has committed only when possession was scheduled to be delivered. Since the default had occurred over three years before the date of filing of Section 7 Application, the Application is a time barred Application. Whether the Application is maintainable against the Corporate Debtor/builder alone since the project is a joint venture by the Corporate Debtor and M/s. Cherupushpam Films (P) Ltd? - HELD THAT:- Both the parties would be jointly responsible for and participate in the construction or development. The terms and conditions with respect to institutional areas and common areas also reflect that the cost would be shared between both the parties at the rate of 60 and 40 substantiates that it is a ‘Joint Venture’ Agreement. Thus the Agreement entered between the Corporate Debtor and M/s. Cherupushpam Films Pvt Ltd dated 08.12.2003 reflects a commercial transaction in the nature of a ‘Joint Venture’ wherein there is division of profits - this Tribunal observe that in such kind of a Joint Venture Project, both the parties, if they are a Corporate should be jointly treated to be one for the purpose of initiation of CIRP. The Applicants have failed to succeed in this Application - Application dismissed. Issues Involved:1. Whether the Application was filed under Section 7 of I&B Code, 2016 by the Applicants in the capacity of Allottees of Apartments or on the basis of Arbitral Award as Decree HoldersRs.2. Whether the Application is barred by limitationRs.3. Whether the Application is maintainable against the Corporate Debtor/builder alone since the project is a joint venture by the Corporate Debtor and M/s. Cherupushpam Films (P) LtdRs.Issue-wise Detailed Analysis:Issue No. 1: Capacity of Applicants (Allottees vs. Decree Holders)The Applicants contended that they entered into an agreement with the Corporate Debtor and M/s. Cherupushpam Films (P) Ltd to purchase apartments, and the Corporate Debtor acknowledged the sale consideration. The Respondent argued that the Application was filed by the Applicants as 'decree holders' and not as 'allottees'. The Tribunal examined Section 5(7) and Section 5(8) of the I&B Code, 2016, which define 'Financial Creditor' and 'Financial Debt'. The Tribunal found that the debt was disbursed against the consideration for the time value of money, including amounts raised from allottees under a real estate project, thus having the commercial effect of a borrowing. Therefore, the Applicants were considered as Financial Creditors.Issue No. 2: LimitationThe Corporate Debtor argued that the Application was barred by limitation as the default occurred over three years prior to the date of filing. The Applicants countered that the default date should be considered as the date when the Corporate Debtor failed to deliver possession after receiving notice. The Tribunal noted that the Corporate Debtor failed to deliver possession and did not produce any documents showing that possession was offered within the stipulated time. The Tribunal referred to the Supreme Court judgment in Gaurav Hargovindbhai Dave v. Asset Reconstruction Company (India) Ltd., which held that the limitation period begins from the date of default. Since the default occurred over three years before the filing date, the Application was deemed time-barred.Issue No. 3: Maintainability Against Corporate Debtor AloneThe Respondent contended that the Application was not maintainable against the Corporate Debtor alone since the project was a joint venture with M/s. Cherupushpam Films (P) Ltd. The Applicants argued that they could proceed against any one of the partners of the joint venture. The Tribunal examined the joint venture agreement and found that both parties were jointly responsible for the construction and development, sharing costs and profits. The Tribunal referred to the NCLAT judgment in Mamatha v. AMB Infrabuild Pvt. Ltd., which held that in a joint venture project, both parties should be treated as one for the purpose of initiating CIRP. Therefore, the Application was not maintainable against the Corporate Debtor alone.Conclusion:The Tribunal concluded that the Applicants failed to succeed in their Application on all three issues. Consequently, the Application IBA/31/KOB/2020 was dismissed for being devoid of merit.Dated the 21st day of April, 2021.